JF1668: Buy & Hold Investor Got His Start By Wholesaling with Ryan Dossey

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Ryan and his team were focused on wholesaling and then flipping, and then got into buy and hold investments. He’s built a good sized real estate business and is here today to tell us how he’s been able to have great success. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“One of our acquisition guys gets 10-12% of the commission on something we sell” – Ryan Dossey

 

Ryan Dossey Real Estate Background:

 


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TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Ryan Dossey. How are you doing, Ryan?

Ryan Dossey: Doing good, Joe. Thanks for having me on.

Joe Fairless: My pleasure, nice to have you on the show. A little bit about Ryan – he is a buy and hold investor with assets in Indianapolis, Louisville and St. Louis. He’s also the founder of Call Porter and Ballpoint Marketing. He closed on 73 units last year using the BRRRR method, and he’s based in Indianapolis, Indiana. With that being said, Ryan, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Ryan Dossey: Yeah, absolutely. I’ve been doing real estate for about four years now. I started out like most folks with wholesaling, did  a yellow letter campaign, got lucky on our first one… From there, we kind of transitioned into some other remodeling stuff; I did a couple and realized I really didn’t like it, and then in 2017, towards the end of the year, we transitioned more over towards buy and hold.

Currently, we’re actually now focusing on two units and up, reason being eventually we wanna push our team the multifamily direction, so we’re basically not letting them do single-families after this quarter, then duplexes, triplexes, and eventually just five on up.

It’s been working really well for us, because most of the single-families we were keeping; they’re like your hedge-fund-esque, “everybody wants” kind of deals… So we’ve started to sell those off and just start to focus more of our marketing efforts towards the small multifamilies.

Joe Fairless: You started wholesaling, then remodeling, and then in 2017 focus was on buy and hold…

Ryan Dossey: Yup.

Joe Fairless: In my mind, wholesaling and remodeling – that is a way to earn income, whereas buy and hold, you earn passive income, but you need income to buy those properties; so in my mind, those are almost like two separate things. One, you’re making money, and then second is buy and hold as you’re making money, but you have to put money upfront.

So did you reach a tipping point with cash reserves, where it’s like “Okay, now we can just focus on buy and holds” or you earning income other ways to acquire more buy and holds?

Ryan Dossey: Good question. Wholesale was not really a  process I super-enjoyed; the typical wholesale anyway, of throw it under contract and hope to find a buyer. So we actually ended up partnering up with a group that’s called Stewardship Properties. They’ve got a pretty large pool of private money raised, so we’re using private funding paying cash, and then we’re using some wholesaling and some flipping to cover things like operating costs as we go. Last year alone we had like $97,000 in holding costs just on our BRRRR deals, during construction, prior to lease-up.

Joe Fairless: Okay. I think you explained that very clearly, but I think I’d still like clarification, just for my own purposes…

Ryan Dossey: Sure.

Joe Fairless: So you are partnering with a group that is bringing private money to your buy and holds, and then – is the business plan for you to improve those properties and refinance them out?

Ryan Dossey: Correct, yeah. All of these properties are like A and B-class. Our typical formula – we go 75% minus repairs, minus an additional 5k to help cover any surprises, holding costs, any of that kind of stuff. We’re targeting a minimum of a 1.2% rent-to-cost ration. So your typical BRRRR deals.

Joe Fairless: Okay. So your macro-level business plan is you find a property that has equity in it and that you can repair, so that you can cash out the private funding person or group, and hold on to that property in the long-run and make money off of the rent.

Ryan Dossey: Correct, yeah. Ultimately, we use the analogy that we’re flipping capital, not flipping properties. Most of our private money is about 8% interest-only. We do a two-year renewable term. Most of our banks have a 6 to 12-month seasoning. We’re working with one right now that actually has no seasoning requirements at all, so we’re basically getting the properties turned, leased, and then passing them over to our bank.

Joe Fairless: Okay. Is it  a local community bank/credit union?

Ryan Dossey: Not a credit union, but kind of a local — they’re in a couple markets, but they’re kind of a smaller community bank.

Joe Fairless: What bank is it ?

Ryan Dossey: The banks is called Busey.

Joe Fairless: Busey… Okay.

Ryan Dossey: Yeah. They’re in Indiana, Central Illinois and St. Louis.

Joe Fairless: And you’re based in Indianapolis, but you have properties in a couple other cities… How did you get into those other cities?

Ryan Dossey: I’m originally from St. Louis. I lived there for about ten years before I came out to Indi. I’ve only been out in Indi for a little over three years now.

Joe Fairless: What brought you to Indianapolis?

Ryan Dossey: My wife, actually. She is going to school, she is getting her doctorate in Psychology.

Joe Fairless: Okay.

Ryan Dossey: Yeah, so that’s actually where I originally started with real estate. My first year I think we bought two rentals that I ended up selling my interest in to a partner there where I moved out here… So we basically just have ground partners that are equity owners in our portfolios in both of those markets. So I support them from here with marketing, systems, our admin does some of their stuff for them, and then I’m out there probably about once a quarter.

Joe Fairless: What’s been a challenge of your as you’ve evolved your approach from wholesaling to remodeling to now flipping capital, as you call it?

Ryan Dossey: Good question. I think most of our challenges have people-related, just making sure we have the right people in the right places, and kind of dealing with some of those interpersonal, if you have an equity partner and holding them accountable to things, and really kind of making sure everybody’s working towards the same common goal.

Joe Fairless: It’s interesting, because you’re doing the BRRRR method at scale, and I traditionally think of it as a…

Ryan Dossey: Onesie-twosie?

Joe Fairless: Yeah. It’s interesting to hear that. So one challenge that you’ve overcome is the seasoning period for financing, and you’re using Busey Bank for that.

Ryan Dossey: We’re using them in one market. We’ve got other smaller banks, one in St. Louis and one in Kentucky, and actually our bank in Kentucky is like no seasoning, they’ll go up to 80%, and they’re even potentially interested in funding stuff in Indianapolis for us. So it’s kind of a little bit of a white whale there.

Joe Fairless: So one challenge was seasoning, you’ve resolved that; another, I imagine, is finding the opportunities to do this with… So how are you finding the opportunities?

Ryan Dossey: Really inventory sourcing is not an issue for us. We have the number one ranking “we buy houses” site here in Indianapolis, just organically through Google. We do 10k to 15k pieces of mail a month, just here in Indianapolis [unintelligible [00:09:01].11] calls, we have an acquisitions manager that’ll actually book appointments; he goes and runs the calls, makes the offers… So really the sourcing inventory hasn’t been that big of a struggle for us, honestly.

Joe Fairless: “We buy houses” – is that something you had to pay to participate in?

Ryan Dossey: No, no… When I say “We buy houses”, I’m just talking the keyword. If you google “we buy houses”, which is what most sellers are looking for, we come up before the franchises.

Joe Fairless: [laughs] Nice. How did you do that?

Ryan Dossey: …thanks to whoever won that lawsuit. [laughter] I think that was Brad Chandler. [laughs]

Joe Fairless: I didn’t know that someone sued and was like “Hey, you can’t own WeBuyHouses”, and they won.

Ryan Dossey: Yeah, they did. It was a pretty big, pretty expensive court case. It had to do with trademark infringement stuff, and Brad ended up winning.

Joe Fairless: Oh, okay. And how did you get to be number one?

Ryan Dossey: I wish I had a “do this, do that” for you. There was a guy that I used to work with back in my day job who reached out to me when I started in real estate investing. He was like, “Hey, I’m doing this SEO thing. I’d like to try it for an investor.” And he quoted me like 2k a month. At the time, I was like “That’s insane. There’s no way.” But then I started to think about. I mean, if I get one deal a year, it’s more than paid for itself… So we started paying him; we got to month three, still nothing. Month four, we started to see some movement, and then by month six we were actually first for most of our keywords. I think I’m first for like 18 or 19 different cities, kind of in my farm area, in the nine counties I’m in now.

Joe Fairless: That’s great. So you hire someone who is focused on that…

Ryan Dossey: Someone way smarter than me. [laughs]

Joe Fairless: Yeah, yeah. You know what the lifetime value of a customer is for you, and then as long as that math works for what you make on a deal, then you can invest in it and see how it goes.

Ryan Dossey: Yeah. And we actually brought him in as a partner in a different venture, so he only works on my stuff now. We had a couple friends try him out, and he got some friends of mine the first or second in Miami in like three months… So I was like, “Hey, this guy knows what he’s doing… Let’s lock him down.” [laughs]

Joe Fairless: I get that. You’ve talked about how you got inventory, we’ve talked about the loan aspect, with the seasoning and getting the right financing… What else would a Best Ever listener need to know in order to scale from, as you said, a onesie-twosie BRRRR approach, to buying 70+ BRRRRs a year?

Ryan Dossey: So it’s definitely cash-intensive, right? You can start to do the math. We’re dropping 10k-15k pieces of mail a month; we’ve got two full-time acquisitions guys, we’ve got a full-time leasing/admin person, and that’s just here in Indianapolis. So it’s one of those — you’re gonna need to have some source of capital. Whether that’s private funding, whether that’s money you’ve saved up, or if it’s buying and selling wholesale properties. That’s actually how I found my Kentucky partner; he hit me up through Instagram, and — I’m sure you get this stuff all the time… “Hey, teach me how to invest.” And I was like, “You know what, I’ve got some time today.” I ended up on the phone with him for about an hour, I gave him some really advanced tips, and then got off the call, thought “He’s probably not gonna do anything with that”, but I gave back a little…

And he reached out to me 45 days later; he was like, “Hey man, I really appreciate it.” He wholesaled two houses, made like 34k. I was like, “Okay, you have my attention.”

Joe Fairless: That’s awesome. So you’ve got the inventory, seasoning, and just the amount of money that’s needed to get going and keep that business going. Anything else that you think you should mention to scale a BRRRR approach?

Ryan Dossey: You really have to know your numbers of have somebody who knows them. The actual bookkeeping side of stuff really surprised me as we’ve started going, realizing “Hey, what are we all-into some of these properties for?” It’s not as simple as “purchase plus repairs.” What did your marketing cost you? What kind of commission did you have to pay your acquisitions manager? And making sure you’ve still got a deal that you can effectively BRRRR out of.

For us, we try to focus on the stuff that everybody wants. Most of our rentals actually are built newer than 2000. Three beds, 2,5 baths, or larger, attached two-car garage, vinyl or brick, in kind of those newer neighborhoods. They’re a lot less work than some of the lower-end stuff.

We bought a duplex that we probably never should have bought. It was an absolute steal, fell into our lap, and I think it took us four months to find a tenant that we approved of for our screening criteria.

So I think it’s of those just – be cognizant of where you’re operating in, don’t necessarily go for the B and C-class areas; I think it’s good to have a mix. But I’ve actually got a house that I literally sell tomorrow – bought as a BRRRR deal, and we ended up into it for about 165k; the house was worth 210k-220k. The problem is we finished right after schools went back. So most people that reached out weren’t interested in moving until basically the next year. We had people that were like, “Hey, can you hold it for me?”

Long story short – holding costs on it started to just rack up; we had a pipe freeze over winter… Nothing major, it was an exterior deal, but we ended up at the point where “Okay, we’re into this thing for 180k now, and it’s just been sitting.” So we decided this is a nice enough house, let’s sell it. We threw it on the MLS, and we’re actually gonna walk with somewhere around 20k-25k after it’s all said and done.

So I would also say just have multiple exit strategies. Don’t have it be something that it has to appraise — I saw a thread on Bigger Pockets today with a guy talking about doing a slow BRRRR, where he bought a deal for 90% of what it’s worth, and he’s hoping appreciation unburies him in three years… I was like, “That’s terrifying.”

The big thing with just about everything I own is I’m fairly confident that we could sell it on the MLS for more than we’re into it by quite a good margin tomorrow, if we needed to.

Joe Fairless: That’s what I was wondering about… Because when you are doing the BRRRR method, you’re basically getting your money that you put into it back out of it, and — there might be a spread there too, but on average, I don’t imagine there’s a huge spread after you get all your money back out, and really the goal here (it sounds like) is to build that rental income for the long-run.

So the thought I had was, well, I love that approach for the long-run, but if you have a team, then that rental income – it’s gonna take a long time to build up, so that you can pay the team… So you’ve got to also be doing some other deals on the side to get chunks of cash to pay the team. Am I thinking about that accurately?

Ryan Dossey: Yeah, it’s kind of cheesy, but we use the expression “Keep the best, wholesale the rest.” Part of the reason we decided to start offloading new single-family leads that come in – I’m not selling any of my current inventory, but new stuff that comes in – is there’s such a high demand for this quality of product that we’re sourcing. We had a deal that we set up, kind of a group showing, and a guy reached out and was like “I’ll give you your asking price, cash, as is, site unseen if you cancel the showing.” I was like, “Alright, done. I’ll do that all day long.”

So we’re doing some of that… The other way to potentially do it – my maintenance guy, we kind of hacked his salary. We realized we didn’t have really enough demand for a maintenance guy, yet we needed one. I think we picked him up when we were at 35 or 40 units. Well, we talked to our GC and we figured out “Look, we can actually have him use some of our tear-out, and that’s gonna lower our renovation costs by more than enough to cover his salary, and then the rest of the time he’s free to run calls.” We do all of our management in-house.

So we do that, and then with our acquisitions guys, we go 70%, minus repairs, minus an extra 5k. That’s their MAO, and they’ll shoot below that sometimes. So a lot of the times my big thing is our team has to be paying for themselves, myself included. If I’m gonna pull out of our cashflow to pay myself, I have to be pulling in more than that amount of cash; that’s the way I look at it.

Joe Fairless: Do you have a multiple that you look at?

Ryan Dossey: We don’t…

Joe Fairless: I’ve always thought about that with team members – you’ve gotta be paying for yourself, but if you just pay for yourself, then there is no business.

Ryan Dossey: Well, yeah… I mean, it’s–

Joe Fairless: It’s like two times multiple, or you’ve gotta bring in three times… And maybe it’s not telling them that, but just…

Ryan Dossey: Having that metric… Yeah, it’s a great idea. It’s probably something we should spend some time figuring out on our end. But when I say “paying for themselves”, I’m talking substantially so. Typically, one of our acquisitions guys is gonna get 10%-12% of the commission on something that we decide to wholesale or wholetail off… And realistically, if they do a deal a month, they should have more than paid for themselves and covered their base salary.

Joe Fairless: Sure. What’s your best real estate investing advice ever?

Ryan Dossey: My best ever – have people that you can bounce deals off of, that aren’t there, they haven’t looked at it, they haven’t met with the homeowner, they’re not wanting the deal – to give you serious, honest feedback.

That deal I mentioned that we’re selling off, one of the gals on our team was like “Hey, I don’t know about this one…” And I ended up “No, I think this is a good one. We’ve got multiple exit strategies. Let’s try it.” Ultimately, she ended up being right. Had we closed on that house and just resold it right away, we would have made an extra $20,000.

So surrounding yourself with people that aren’t afraid to give you their feedback, whether you want it or not. [laughter]

Joe Fairless: We’re gonna do a lightning round. Are  you ready for the Best Ever Lightning Round?

Ryan Dossey: Yup.

Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.

Break: [00:18:48].08] to [00:19:54].27]

Joe Fairless: Best ever book you’ve recently read?

Ryan Dossey: Best book that I recently read… It’s probably been mentioned on here a ton, but I’m gonna go with Extreme Ownership.

Joe Fairless: Who wrote that?

Ryan Dossey: Jocko Willink and Leif Babin.

Joe Fairless: Right, right, right… Navy seal?

Ryan Dossey: Yup. I listen to it on audio, and it was about one of the most interesting books that I think I’ve ever listened to.

Joe Fairless: Okay. Best ever deal you’ve done?

Ryan Dossey: Best deal I have ever done… Alright, so this is kind of cool; not a numbers thing at all. Totally just a personal thing. So I got into real estate because I’m a car guy. I got to the point where I could afford something nice, and then didn’t want it on my credit, didn’t wanna throw out that amount of cash… So I actually got a house under contract, and a buddy of mine owns a somewhat high-end car rental company, and they decided they wanted to get into real estate investing. So I wholesaled them the house, made 8k, and in return got an Alfa Romeo 4C for a year at no cost to me. So I got paid on it, and got a car out of it for the year.

Joe Fairless: What’s a mistake you’ve made on a transaction?

Ryan Dossey: School districts… [laughs] I did a flip in a super high-end neighborhood; I bought a house for 110k. I was like, “This is gonna be a home run.” Our remodel ended up being 200k, which was the largest single-family remodel I’d done at that point… And comps had us at 450k all day long. So we listed at 450k, nothing happened. We ended up dropping by 10k, dropping by 10k… Ended up finally selling at 390k. The issue we ran into – the comps we’d pulled, even though they were a tenth of a mile away, were on the other side of the school district line.

Joe Fairless: What’s the best ever way you like to give back?

Ryan Dossey: The best way I like to give back… To the world in general, or the investment community in particular?

Joe Fairless: However you wanna take that question.

Ryan Dossey: For me, I like to help people get from where they are to where they can be. I run a small, free Facebook group and we do a lot of stuff in there, showing people really complex stuff and breaking down things like how to get press releases and stuff done. We recently did a giveaway in there, and one of our guys – we gave out like 2,000 pieces of mail – ended up wholesaling two houses, made 50k, and launched his investment career… So it was pretty cool.

Joe Fairless: How can the Best Ever listeners learn more about what you’ve got going on?

Ryan Dossey: They can reach out to me through Facebook, Instagram or YouTube. I think you guys have all of those links.

Joe Fairless: Well, thank you so much for being on the show, Ryan, and talking about how to scale a BRRRR method. There are multiple takeaways; it was really interesting to me how you’ve managed to buy over 70 properties last year using the BRRRR method, and the challenges that we’d have to overcome in order to do that – finding inventory, the loan and the seasoning period, having the money that’s required in order to do this, as well as knowing your numbers and scaling the team, while having multiple exit strategies… So thanks again for being on the show, talking about your background and what you all are doing.

I hope you have a best ever day, and we’ll talk to you soon.

Ryan Dossey: Thanks for having me, guys.

 

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